NorthWestern
Annual Report 2021

Plain-text annual report

ANNUAL FINANCIAL REPORT For the year ending 30 June 2021 ABN 65 078 301 505 CORPORATE DIRECTORY NORWEST ENERGY NL Registered Office ABN 65 078 301 505 ACN 078 301 505 Directors Mr Ernest Anthony Myers (Non-Executive Chairman) Level 2, 30 Richardson Street West Perth WA 6005 Tel: + 61 8 9227 3240 Fax: + 61 8 9227 3211 Share Registry Mr Bruce Frederick William Clement (Non-Executive Director) Computershare Investor Services Pty Ltd GPO Box D182 Perth WA 6840 Managing Director Mr Iain Peter Smith Company Secretary Ms Jo-Ann Long Internet Address www.norwestenergy.com.au Shareholder Enquiries Level 11 172 St Georges Terrace Perth WA 6000 Telephone: 1300 850 505 Auditors Rothsay Auditing Level 1, Lincoln House 4 Ventnor Avenue West Perth WA 6005 info@norwestenergy.com.au Australian Securities Exchange NWE Contents Directors’ Report Lead Auditor’s Independence Declaration Corporate Governance Statement Independent Audit Report Directors’ Declaration Statement of Profit or Loss and other Comprehensive Income Statement of Financial Position Statement of Changes in Equity Statement of Cash Flows Notes to the Financial Statements 5 14 15 21 25 26 27 28 29 30 2 Directors’ Report The Directors of Norwest Energy NL (“Norwest” or “the Company”) herein present their financial report of the Company and its subsidiaries (“Consolidated entity” or “Group”), for the financial year ended 30 June 2021. 1. DIRECTORS AND OFFICERS The names and details of the Company's Directors in office during the financial year and until the date of this report are as follows. Directors were in office for this entire period unless otherwise stated. Ernest Myers (Independent Non-Executive Chairman) CPA Mr Myers became a Director of Norwest on 28 November 2018. Mr Myers, an Accountant by profession, has held senior management and executive roles within a number of ASX listed companies. During his career he has been instrumental in the capital raisings and financial management of these companies. With skills and knowledge gained from vast experiences in corporate, exploration and operational areas, Mr Myers has played a key role in maintaining the Company’s financial stability. Mr Myers is an executive director and CEO of Pancontinental Oil & Gas NL. Iain Smith (Managing Director) BSc, MSc, GD-BA Mr Smith joined Norwest Energy on 2 April 2019. Mr Smith is a petroleum geoscientist with 32 years’ broad experience of the upstream oil & gas industry, both internationally and in Australia. His early career saw him work offshore UK North Sea, before joining Premier Oil as a New Ventures Explorationist. Thereafter, Mr Smith spent seven years in the geoscience services sector, before joining Woodside Energy in a commercial role. At Woodside he worked within the Exploration & New Ventures group, and subsequently the Browse LNG project, with responsibilities including commercial analysis and asset divestment. In 2008 Mr Smith joined private exploration company Neon Energy, as Commercial Manager, and was responsible for the subsequent merger with ASX-listed Salinas Energy. He managed the commercial and investor relations aspects of the company’s activities in Southeast Asia and California, including the high profile farmout of Neon’s two offshore Vietnam projects. In 2016 Mr Smith joined Pilot Energy as Managing Director, overseeing an aggressive new ventures campaign that resulted in the low-cost acquisition of six exploration permits within Western Australia, including within the onshore and offshore Perth Basin. Bruce Clement (Non-Executive Director) BEng, BSc, MBA (Appointed 18 December 2019) Mr Clement became a Director on 18 December 2019. Mr Clement has 41 years’ oil and gas industry experience having held engineering, senior management, and board positions with a variety of companies including ExxonMobil, Ampolex, Roc Oil, AWE and Santos. He has extensive experience and knowledge of the Perth Basin, previously managing development of the Cliff Head oil field for Roc Oil and, more recently, overseeing the discovery of the Waitsia gas field as Managing Director of AWE. Mr Clement is a non-executive director of Horizon Oil Limited. Jo-Ann Long (Company Secretary and Chief Financial Officer) B.Comm, FCA, GAICD Ms Long was appointed CFO and Company Secretary on 2 April 2019. Ms Long has over 32 years of experience building, leading and advising corporations on financial management, restructuring, international expansion, acquisitions and risk management, initially with Deloitte’s and subsequently with 23 years spent in the Oil and Gas industry with Woodside, and a number of junior Oil & Gas companies. Ms Long has specialised expertise in joint venture operations, commercial agreements, tax strategies, risk management and governance. With strong broad commercial and business skills Ms Long brings a strong discipline of financial management and a track record of documented contributions of improved financial performance, heightened productivity and enhanced internal controls. Ms Long is Managing Director of Eco Smart Designs and West Perth Accounting and holds non-executive directorships with Yijiyangu Corporation Limited and B2 Yaramarri Direct Benefits Trust. 3 2. DIRECTORS' INTERESTS As at the date of this report the Director’s interests in the securities of the Company are as follows: Iain Smith (Managing Director) Ernest Myers (Non-Executive Chairman) Bruce Clement (Non-Executive Director) 3. EARNINGS PER SHARE Ordinary Shares 4,285,715 4,285,715 - Basic earnings per share (cents per share) Diluted earnings per share (cents per share) 2021 (0.01) (0.01) Options over Ordinary Shares 92,142,857 17,142,857 15,000,000 2020 (0.19) (0.19) 4. CORPORATE INFORMATION Corporate Structure The Company is a no liability company that is incorporated and domiciled in Australia. Nature of Operations and Principal Activities The principal activity of the Consolidated entity during the course of the financial year was exploration for hydrocarbon resources. Norwest is Operator of the TP/15 Joint Venture via its subsidiary Westranch Holdings Pty Ltd. 4 5. OPERATING AND FINANCIAL REVIEW Operational Review As at the date of this report, the Group holds interests in the following North Perth Basin exploration permits (see Figure 1): • • • 20% working interest in EP368 22.22% working interest in EP426 25% working interest in TP/15 (as Operator) Figure 1: Norwest Energy Perth Basin Permit Interests Exploration Permits EP368 & EP426 During the reporting period the EP368 Joint Venture secured the Ensign 970 drilling rig to drill the Lockyer Deep-1 conventional gas prospect, situated on trend with the significant gas discoveries made at Waitsia, West Erregulla and Beharra Springs Deep. These discoveries have greatly enhanced the prospectivity of exploration permits EP368 and EP426. Drilling of Lockyer Deep-1 commenced in July 2021 and resulted in a significant gas discovery within the Kingia Formation at a depth of 4,041 metres (MDRT). The well will be completed for production testing, the results of which will inform the future appraisal program that may include seismic data acquisition and the drilling of additional wells. 5 Significant additional prospectivity is present within EP368 and EP426, including the Greater Springy Creek oil prospect (gross, high case prospective resources up to 61 MMbbls oil, refer ASX announcement of 8 July 2019) and a variety of conventional gas leads which will be matured through the acquisition of additional 2D seismic data (Refer figure 2). Figure 2: Exploration Permits EP368 and EP426 Prospects & Leads EP368 JV Participants Westranch Holdings Pty Ltd1 Energy Resources Ltd2 EP426 JV Participants Westranch Holdings Pty Ltd Energy Resources Ltd 20% 80% (Operator) 22.22% 77.78% (Operator) 1 Westranch Holdings Pty Ltd is a wholly owned subsidiary of Norwest Energy NL. 2 Energy Resources Ltd is a wholly owned subsidiary of Mineral Resources Ltd. Exploration Permit TP/15 The TP/15 Joint Venture has re-evaluated the permit's prospectivity in light of the gas discoveries which have been made onshore in recent years within Permian sandstone reservoirs, and has identified the large Texel prospect, which offers potential for oil to be accumulated within the Irwin River Coal Measures and the Kingia/High Cliff Sandstones. Additional 2D seismic data is required to mature this prospect for drilling, and the Joint Venture received approval from the Department of Mines, Industry Regulation & Safety (DMIRS) to replace the year three appraisal well work commitment with geological studies and seismic feasibility studies. A decision will be made in late 2021 whether to proceed into the next permit year, with an associated work commitment to acquire 100 line kms of shallow marine 2D seismic data. 6 Figure 3: Exploration Permit TP/15 TP/15 JV Participants Westranch Holdings Pty Ltd 3C Group Triangle Xanadu Pty Ltd3 25% 30% 45% (Operator) 3 Triangle Xanadu Pty Ltd is a wholly owned subsidiary of Triangle Energy Ltd COVID-19 The impact of the COVID-19 pandemic upon the Company's operations has been limited due to the fact that there has been only minor operational activity since the onset of the pandemic in Western Australia. During the reporting period the Company implemented precautionary measures to protect its personnel, including the ability to work remotely whenever necessary. Subsequent to the reporting period the Company experienced a slight delay and small additional cost during the early stages of drilling the Lockyer Deep-1 gas prospect, due to COVID-19 related interstate border restrictions and an associated effect upon crew scheduling. 7 Financial Review Focus of the Business Norwest Energy is focused on developing its exploration interests in the north Perth Basin, Western Australia. The Company may seek to farm out project interests where appropriate in order to manage its capital, de-risk its exposure and facilitate successful exploration and development. Financial Results The net loss of the Consolidated entity for the year ended 30 June 2021 of $445,255 was lower than the loss of the prior year 2020 ($7,846,201). The main contributing factors were: • No further significant impairment of the Company’s exploration permits; and • Disposal of the Exploration Permit EP413 and write back of the associated Restoration Provision Financial Position At 30 June 2021, the Group had cash reserves of $3.5m (2020: $3.1m). At 30 June 2021, the Group had net assets of $4.6m (2020: $3.1m) an increase of $1.5m from the previous year. These changes are largely attributable to the following: Capital raising of approximately $2.0 million via a share placement; Exploration expenditure on EP368 and EP426; and • • • Receipt of approximately $174,000 under the R&D Tax Incentive Scheme. Performance Indicators and Risk Management Management and the Board regularly monitor the Group's overall performance by: • • • assessing whether exploration activity and expenditure is adding value to the asset portfolio; analysis of financial budgets versus actual results; and the Company’s share price. The underlying drivers which contribute to the Company’s performance are directly controlled using a disciplined approach to reducing the Group’s non-essential costs and allocating funds to those activities which will add to shareholder value. The Company's share price may be influenced by factors outside the control of management and the Board, such as market conditions and commodity prices. The Board takes a pro-active approach to risk management and is responsible for ensuring that both risks and opportunities are identified in a timely manner so that the Company's activities are focused on mitigating risks to the fullest extent possible while taking maximum advantage of opportunities. 6. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS In the opinion of Directors there were no significant changes in the state of affairs of the Group that occurred during the financial year. 7. SIGNIFICANT EVENTS AFTER THE BALANCE DATE Other than the events outlined in note 24 of the financial statements, at the date of this report, there are no matters or circumstances which have arisen since 30 June 2021 that have significantly affected, or may significantly affect, the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years. 8. LIKELY DEVELOPMENTS AND EXPECTED RESULTS There were no likely developments in the operations of the Group that were not finalised at the date of this report. 9. ENVIRONMENTAL AND HEALTH & SAFETY Norwest Energy is subject to significant environmental regulation in respect of exploration activities within the permits which it operates and is committed to undertaking all operational activities in an environmentally responsible manner. The Directors believe that the Company has adequate systems in place for managing its environmental commitments and is not aware of any breach under its obligations. Similarly, Norwest Energy operates under strict health and safety guidelines and regulations, and regards the wellbeing of its personnel, contractors, partners and all stakeholders as a priority. The Directors believe that the Company has adequate systems in place for ensuring it maintains its excellent track record with regards to health and safety and note that during the reporting period there were no lost-time injuries related to its operational activities. 8 10. CLIMATE RISK Norwest Energy believes that a wide variety of energy sources will be required over the coming decades to meet global energy demand while transitioning to a fully renewable energy economy. As a junior explorer primarily focused on natural gas, we regard gas as a critical component of the ongoing transition, and the Board of Directors has identified various climate-related risks to the business of Norwest Energy, as follows: • Public perception towards the natural gas industry, including financial institutions and the investment community • Demand for natural gas, both domestically and overseas • • • The potential for enhanced carbon pricing legislation Increased shareholder activism Increasing insurance costs The Board is committed to: • • Identifying, managing and mitigating material climate risks to the business Ensuring that the company's practices and procedures integrate consideration of climate-related risks into investment and project decision-making, and • Constant monitoring of changes in climate policy. We believe that the significance of natural gas as part of the global transition to sustainable energy presents opportunities to the Company. Norwest Energy acknowledges the increasing interest of the community and the Company's stakeholders regarding the possible risks and opportunities presented by climate change and the increasing momentum towards a low carbon economy. 11. INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS The Constitution of the Company requires the Company, to the extent permitted by law, to indemnify any person who has been an officer of the Company or Group for any liability caused as such by an officer and any legal costs incurred in defending an action for any liability. During or since the end of the financial year, no amounts have been paid by the Company or Group in relation to the above indemnities. During the financial year, an annualised insurance premium was paid to provide insurance cover for Directors and Officers against any potential liability and the associated legal expenses of any proceeding. 12. DIVIDENDS No dividends were paid or declared since the start of the financial year. No recommendation for payment of dividends has been made. 13. REMUNERATION REPORT - Audited This Remuneration Report, which forms part of the Directors’ Report, outlines the remuneration of the Key Management Personnel (“KMP”) of Norwest. For the purposes of this report, the KMP are the Directors and the Company Secretary. Remuneration Policy The Group’s remuneration policy for its KMP has been developed by taking into account the size of the management team for the Group, the nature and stage of development of the current operations and market conditions and comparable salary levels for companies of a similar size and operating in a similar sector. In addition, the Board in determining the remuneration policy for KMP places emphasis on the following: the fact that the Group is currently undertaking only exploration activities, the risks associated with undertaking these activities and (other than profit from asset sales) the Company does not expect to achieve profitable operations until sometime in the future. Executive Remuneration The Group’s remuneration policy for its executive officers is to provide a fixed component and a performance-based component (short- and long-term incentives). The Company aims to: • • • reward executives with a level and mix of remuneration commensurate with their position and responsibilities within the Company. align the interests of executives with those of shareholders and business objectives; and ensure total remuneration is competitive by market standards. 9 Fixed remuneration is reviewed regularly by the Board. The process consists of a review of Company and individual performance, comparative remuneration externally and, where appropriate, external advice on policies and practices. It also takes into account any change to the scope of the role performed by the executive and any other relevant factors of influence. Employment Contracts with Executives Mr Iain Smith, Managing Director – from 2nd April 2019 Mr Smith has a Services Agreement (“the agreement”) which specifies the duties and obligations to be fulfilled in his role. As of 1 August 2020 Mr Smith, receives a fixed remuneration component of $300,000 per annum for the position of Managing Director. The Company or the Managing Director may terminate the agreement by providing 6 months and 3 months’ notice respectively. The Company has implemented a Short-Term Incentive Plan and Mr Smith has been granted Incentive Share Options, as approved by shareholders. Ms Jo-Ann Long Chief Financial Officer and Company Secretary – from 15 September 2017 Ms Long provides the services of part time Chief Financial Officer and Company Secretary under a services agreement that specifies the duties and obligations to be provided in her role. The contract may be terminated by either party by giving 14 days’ notice. Ms Long receives a retainer of $3,000 per month and an hourly rate for certain specialised duties. Non-Executive Director Remuneration The Board’s policy is for fees to Non-Executive Directors to be no greater than market rates for comparable companies for time, commitment and responsibilities and seeks to set remuneration at a level which provides the Company with the ability to attract and retain directors of the highest calibre, whist incurring a cost which is acceptable to shareholders. The Board determines payments to the Non-Executive Directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required. The non-executive directors receive a fixed fee for their services. The maximum aggregate amount of fees that can be paid to Non-Executive Directors is subject to approval by shareholders at a General Meeting (this is currently $400,000 per annum). Fees for Non-Executive Directors are not linked to the performance of the Group. However, to align Directors’ interests with shareholder interests, the Directors are encouraged to hold shares in the Company and given the current size, nature and opportunities of the Company, Non-Executive Directors may receive Incentive Options subject to shareholder approval. Fees for the Chairman are presently $48,000 per annum (2020: $48,000) and fees for Non-Executive Directors are presently set at $36,000 per annum (2020: $36,000). These fees cover main board activities and Non-Executive Directors may receive additional remuneration for other services provided to the Company, including but not limited to, membership of committees. 10 Emoluments of Directors and Other KMP Short term Salary & Fees Post- Employment Superannuation Short Term Incentive Payment Share-based Payments Options $ $ $ Total $ Performance related % 296,000 276,000 - - 25,000 - 60,000 60,000 381,000 336,000 48,000 43,000 - 22,500 32,877 17,764 114,825 163,224 491,702 522,488 - - - - 10,000 10,000 - - 3,123 1,688 - 3,123 1,688 - - - - 10,000 10,000 10,000 10,000 95,000 90,000 58,000 53,000 - 22,500 46,000 29,452 124,825 173,224 609,825 614,176 15.75 17.24 21.74 8.01 Directors Iain Smith 2021 2020 Ernest Myers 2021 2020 Henry D Kennedy (1) 2021 2020 Bruce Clement (2) 2021 2020 Other KMP Jo-Ann Long 2021 2020 TOTAL 2021 TOTAL 2020 (1) Mr Kennedy resigned as a Director on 31st March 2020. (2) Mr Clement was appointed as a Director on 18 December 2019. Options and rights granted to KMP During the financial year ended 30 June 2021 the Company did not grant any options over unissued ordinary shares, (30 June 2020: 135,000,000) in the Company to directors and executives as part of their remuneration. Details of the values of options granted, exercised or lapsed for each KMP of the Group during the past two financial years are as follows: Value of Options granted (A) $ Value of Options exercised (B) $ Value of Options lapsed (C) $ Value of vested Options included in remuneration report $ Remuneration that consists of Options % 2021 Iain Smith Ernest Myers Bruce Clement Jo-Ann Long 2020 Iain Smith Ernest Myers Bruce Clement Jo-Ann Long - - - - 150,000 25,000 25,000 50,000 - - - - - - - - - - - - - - - - 60,000 10,000 10,000 10,000 60,000 10,000 10,000 10,000 15.75 17.24 21.74 8.01 17.85 18.86 33.95 5.77 A. The value of options granted is the fair value of the options calculated at grant date using an appropriate option pricing model. B. The value of options exercised during the year (if any) is calculated as the market price of the shares of the Company on the ASX at the close of trading on the date the options were exercised after deducting the price paid to exercise the option. C. The value of options that lapsed during the year (if any) represents the benefit forgone and is calculated at the date of option issue using option pricing model. For details on the valuation of the options, including models and assumptions used, please refer to Note 17 to the financial statements. 11 Option holdings of Key Management Personnel 2021 Iain Smith Ernest Myers Bruce Clement Jo-Ann Long 2020 Iain Smith Ernest Myers Bruce Clement David Kennedy Jo-Ann Long Held at 1 July 32,142,857 7,142,857 5,000,000 6,428,572 Held at 1 July - - - - - Granted as Remuneration Exercised Vested during the year Vested and exercisable at 30 June - - - - Granted as Remuneratio 90,000,000 15,000,000 15,000,000 - 15,000,000 - - - - Exercised - - - - - 30,000,000 5,000,000 5,000,000 5,000,000 Net Other Change(1) 2,142,857 2,142,857 - 4,300,000 1,428,572 62,142,857 12,142,857 10,000,000 11,428,572 Vested and exercisable at 30 June 32,142,857 7,142,857 5,000,000 4,300,000 6,428,572 Note (1): Listed options issued as a result of management participation in the share placement dated 19th November 2019 Shareholdings of Key Management Personnel Held at 1 July Purchases Sales Net Other Change Held at 30 June 2021 Iain Smith Ernest Myers Bruce Clement Jo-Ann Long 2020 Iain Smith Ernest Myers David Kennedy Jo-Ann Long 4,285,715 4,285,715 - 2,857,144 - - - - - - 197,650,380 - 4,285,715 4,285,715 114,400,000 2,857,144 - - - - - - - - - - - - - - (30,156,250) - 4,285,715 4,285,715 - 2,857,144 4,285,715 4,285,715 281,894,130 2,857,144 No loans were provided to or received from Key Management Personnel during the year ended 30 June 2021 (2020: $1,000,000). Other Transactions with KMP Nil. End of Remuneration Report. 12 14. SHARE OPTIONS At 30 June 2021 unissued ordinary shares under options were: Expiry date (Options Listed) 24 Jan 2022 Total outstanding as at 30 June 2021 Expiry date (Options Unlisted) 30 June 2024 30 June 2024 30 June 2025 30 June 2025 30 June 2026 30 June 2026 Total outstanding as at 30 June 2021 Exercise price $0.006 Exercise price $0.0089 $0.0107 $0.0089 $0.0107 $0.0089 $0.0107 Number of options 726,187,131 726,187,131 Number of options 42,000,000 10,000,000 42,000,000 10,000,000 42,000,000 10,000,000 156,000,000 15. DIRECTORS’ MEETINGS The number of Board meetings held during the year and the number of meetings attended by each Director was as follows: Mr Ernest Anthony Myers (Non-Executive Chairman) Mr Iain Smith Mr Bruce Clement (Managing Director) (Non-Executive Director) Number eligible to attend 4 4 4 Number attended 4 4 4 In addition to formal Board meetings, the Directors are in continual communication with regards to the Company's activities and strategy. As such, various matters are resolved via Circular Resolutions of the Board of Directors. During the reporting period two such circular resolutions were approved. Committee membership As at the date of this report, the Company did not have any formal committees. 16. AUDITOR’S INDEPENDENCE DECLARATION The auditor’s independence declaration is set out on page 14 and forms part of the Directors’ Report for the year ended 30 June 2021. 17. NON-AUDIT SERVICES The Company’s auditor, Rothsay Auditing did not provide any non-audit services during the year (2020: nil). Dated this 23rd Day of September 2021 in accordance with a resolution of the Directors and signed for and on behalf of the Board by Mr Ernest Anthony Myers Signed Ernest Anthony Myers Non-Executive Director and Chairman 13 AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 As lead auditor of the audit of Norwest Energy NL for the year ended 30 June 2021, I declare that, to the best of my knowledge and belief, there have been: • no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and • no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Norwest Energy NL and the entities it controlled during the year. Rothsay Auditing Donovan Odendaal Partner 23 September 2021 Liability limited by a scheme approved under Professional Standards Legislation Corporate Governance Statement This Corporate Governance Statement has been prepared on the basis of disclosure under the 3rd Edition of the ASX Corporate Governance Council's Corporate Governance Principles and Recommendations (“ASX Principles and Recommendations”). The Company has followed each recommendation where the Board has considered the recommendation to be an appropriate benchmark for corporate governance practices, taking into account factors such as the size of the Company and the Board, resources available and activities of the Company. Where, after due consideration, the Company's corporate governance practices depart from the ASX Principles and Recommendations, the Board has offered full disclosure of the nature of and reason for the departure. The Company's website (www.norwestenergy.com.au) contains a corporate governance section that includes copies of the Company’s corporate governance policies and practices mentioned in this statement. Recommendation Principle 1 – Lay solid foundations for management and oversight 1.1 1.2 1.3 1.4 1.5 1.6 1.7 Disclose the respective roles and responsibilities of the Board and management and disclose those matters expressly reserved to the Board and those delegated to management. Undertake appropriate checks before appointing a Director or putting forward for their election and provide security holders with all material information in its possession relevant to their election or re-election as a director. Written agreement with each director and senior executive setting out the terms of their appointment. The Company Secretary should be accountable to the Board through the Chair, on all matters to do with the proper functioning of the Board. Have a diversity policy with the measurable objectives for achieving gender diversity and to assess annually both the objectives and the entity's progress in achieving them. The proportion of men and woman on the Board, Senior Management and the whole organisation should be disclosed. Disclose a process for periodically evaluating the performance of the Board, its committees and individual directors and disclose whether a performance evaluation was undertaken during the reporting period. Disclose a process for periodically evaluating the performance of the senior executives and disclose in relation to each reporting period whether an evaluation took place during the reporting period. Principle 2 – Structure the Board to add value 2.1 2.2 2.3 2.4 2.5 2.6 If the entity does not have a Nomination Committee disclose that fact and the processes it employs to address board succession issues and to ensure the Board has the correct mix of directors to enable it to discharge its duties and responsibilities effectively. Disclose a Board skills matrix setting out the mix of skills and diversity that the Board has or would like to achieve. Disclose the names of the independent Directors, along with the length of service of each director. A majority of the Board should be independent. The Chair of a Board should be an independent director and should not be the same person as the Managing Director. Have a program for inducting new directors and provide appropriate professional development opportunities for directors to develop and maintain the skills and knowledge needed to perform their role as directors effectively. Principle 3 – Act ethically and responsibly 3.1 Establish a code of conduct for its directors, senior executives and employees. Comply Yes/No Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes 15 Principle 4 – Safeguard integrity in corporate reporting 4.1 4.2 4.3 If the entity does not have an Audit Committee disclose that fact and the processes it employs that independently safeguard the integrity of its corporate reporting, including the processes for the appointment and removal of the external auditor and the rotation of the audit engagement partner. Before the Board approves its’ financial statements, it should receive from its CFO and Managing Director a declaration that in their opinion the financial records have been maintained properly and that the financial records comply with the appropriate accounting standards and the opinion has been formed on the basis of a sound system of risk management and internal control. Ensure that its external auditor attends its AGM and is able to answer questions from security holders relevant to the audit. Yes Yes Yes Principle 5 – Make timely and balanced disclosure 5.1 The entity should have a written policy for complying with its continuous disclosure obligations under the Listing Rules. Yes Principle 6 – Respect the rights of the shareholders 6.1 6.2 6.3 6.4 6.5 Provide information about the entity and its governance to investors via its website. Design and implement an investor relations program to facilitate effective two-way communication. Disclose the policies and processes to facilitate and encourage participation at meetings of shareholders. Ensure all substantive resolutions at a meeting of security holders are decided by a poll rather than by a show of hands. Give shareholders the option to receive and send communications to the entity and it share registry electronically. Principle 7 – Recognise and manage risk 7.1 7.2 7.3 7.4 If the entity does not have a Risk Committee disclose that fact and the processes it employs for overseeing the entity’s risk management framework. The Board should review the entity's risk management framework at least annually to satisfy itself that it continues to be sound and disclose when the review is undertaken. If the entity does not have an internal audit function, disclose that fact and the processes it employs for evaluating and improving the effectiveness of its risk management and internal control processes. Disclose whether it has any material exposure to economic, environmental, and social sustainability risks and if it does, how it manages or intends to manage those risks. Principle 8 – Remunerate fairly and responsibly 8.1 8.2 8.3 If the entity does not have a Remuneration Committee disclose that fact and the processes it employs for setting the level and composition of remuneration for directors and senior management and ensuring that such remuneration is appropriate. Separately disclose its policies and practices regarding the remuneration of non-executive directors, executive directors, and other senior executives. If the entity has an equity-based remuneration scheme, it should have a policy on whether participants are permitted to enter into derivative or other transactions to limit their risk. Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes 16 Further information required and non-compliance explanations Recommendation 1. 5 - Diversity Policy with measurable objectives The Company’s primary objectives with regard to diversity are as follows: • • the Company’s composition of the Board, executive, management and employees to be as diverse as practicable; and to provide equal opportunities for all positions within the Company and continue the Company’s commitment to employment based on merit. The measurable objectives set by the Company with regard to diversity have been met, as described below: • • • blend of skills – wide range of backgrounds; geology, engineering, finance and corporate experience; gender – both male and female members; and age – the age range spans over 25 years. The above points relate to the composition of the Board and full-time employees. The Company’s annual reporting on the percentage of females in the organisation is as follows: Full Time Employees Executive Employees & Board Members Recommendation 1.6 and 1.7 – Performance evaluation % Female 2021 50% 25% 2020 50% 25% During the year an evaluation of the Board and its individual directors was not carried out. The Board and management’s suitability, overall structure and composition to carry out the Company's objectives is however, discussed and reviewed on an as-required basis. Performance evaluation of the Managing Director, senior executives and employees is undertaken annually through a performance appraisal process which involves reviewing and assessment of performance against agreed corporate, industry and individual key performance indicators. Recommendation 2.1 – Nomination Committee The Board does not have a separate Nomination Committee, rather the full Board considers those matters that would usually be the responsibility of a Nomination Committee. Given the size and composition of the Board, it is not practicable for a separate committee to be formed. To assist it in carrying out its function in relation to nomination matters, the Board has adopted a Nomination Committee Charter which includes the following responsibilities: - - - - board succession planning; performance evaluation of the Board and individual directors; director induction and professional development; and appointment and re-election of directors. Recommendation 2.2 – Board skills matrix – composition of the Board The names of the Directors of the Company in office at the date of this statement and information regarding Director’s skills, experience and expertise are set out in the Directors’ Report. The Company seeks to maintain a Board which brings together a diverse range of skills, experience, and perspectives to support the strategic direction of the Company and enable effective management oversight and governance. 17 The below is the preferred combination of capabilities, skills and experience for the Board: - - - - - - - - technical disciplines of upstream oil and gas exploration, development and production; finance, taxation, treasury and accounting; company strategy and business planning; risk and governance knowledge; business growth and corporate development; corporate social responsibility including sustainability and community stakeholder; local and international experience; and ASX listed public company administration. Each of these skills are currently represented on the Board and the Board considers that collectively it has the appropriate range of skills and experience to direct the Company. Recommendation 2.3– Name of independent Directors and length of service of each Director In considering the independence of a director, the “Factors relevant to assessing the independence of a director” in Box 2.3 of the ASX Principles and Recommendations ("Independence Criteria") have been applied. Recommendation 2.4 – Majority of the Board should be independent As at 30 June 2021, Ernest Myers and Bruce Clement are considered to be independent. Given the size and scope of the Company's operations the Board considers that it is appropriately structured to discharge its duties in a manner that is in the best interests of the Company. Further, mechanisms are in place so that if a director considers it necessary, they may obtain independent professional advice. Recommendation 4.1 – Audit Committee The Board does not have a separate Audit Committee, rather the full board fulfils the function of an audit committee and therefore no separate audit committee has been formed in accordance with the compositional recommendation. Given the size and composition of the Board, it is not practicable that a separate audit committee be formed. To assist it in carrying out its function in relation to audit matters, the Company has adopted an Audit Committee Charter to assist it to fulfil its role as the Audit Committee, which includes the following responsibilities: - monitor and review the integrity of the financial reporting of the Company; - - monitor, review and oversee the external audit function including matters concerning appointment, review the Company’s internal financial control system; and remuneration, independence and non-audit services. The Charter provides that independent directors may meet with the external auditor. Recommendation 7.1 – Risk Committee The Company believes that it is crucial for all Board members to be a part of overseeing the risk management process, and as such the Board has not established a separate committee to oversee risk. This along with the size and composition of the Board has meant that the full Board fulfils the function of a risk committee. The Board is responsible for reviewing the Company’s policies on risk oversight and management and satisfying itself that management has developed a sound system of risk management and internal control. Recommendation 7.2 – Risk Management Framework review The Company takes a proactive approach to risk management. The Board is responsible for ensuring that risks and opportunities are identified on a timely basis and that the Company’s objectives and activities are aligned with the risks and opportunities identified by the Board. The Company has a risk management policy in place. 18 The Board is ultimately responsible for risk management, however, implementation of the risk management system and day to day management of risk is the responsibility of the Managing Director, with the assistance of senior management. Management reports to the Board annually, or more frequently as required, on the Company’s key risks and the extent to which it believes these risks are being managed. The Board has a number of active mechanisms in place to ensure that management's objectives and activities are aligned with the business risks identified. These include the following: • Implementation of approved operating plans and cash flow forecasts and Board monitoring of progress against these plans and forecasts; • Management reporting on specific business risks, including matters such as environmental issues and occupational • health and safety concerns. The Company has advised each director, manager and employee that they must comply with a set of ethical standards maintaining appropriate core company values and objectives. Such standards ensure shareholder value is maintained and developed. Standards cover legal compliance, conflict resolution, employment best practices, privileged information and fair dealing. Recommendation 7.3 – Internal Audit function or process for reviewing internal controls The Company does not have a dedicated internal audit function, however strong internal control policies and procedures are in place to effectively manage potential risks and detect any control breakdowns. These are reviewed (and if necessary improved) on an annual basis, as well as when any new risks are identified, or changes occur in the business or industry. The processes for the review are as follows: - External auditors independently evaluating the Company’s internal control environment and its compliance with the International Financial Reporting Standards on an annual basis; - Ongoing oversight of strategic matters by executive management and of operational matters ensuring that risks identified are assessed and proactively managed; - Written internal control assurance from the Managing Director and CFO prior to sign off of financial statements by the Board; and - Monthly reporting and review of financial and budgetary information. Recommendation 7.4 – Material exposure to economic, environmental and social sustainability risks The Company has identified a series of business risks (economic, environmental and social sustainability risks) which the Group believes to be inherent in the industry. Economic risks - Ability to gain additional funding or a farm-out partner The Company is not in production as yet and the development of its permits will require substantial additional financing. Failure to obtain sufficient financing may result in delaying or indefinite postponement of exploration and any development or a loss of equity in permits and licences. However, the Board is experienced in capital markets and financing resource projects as well as having an extensive reach for potential farm-in partners. There are various other economic risks including commodity risk, exchange rate risk and market risk (these risks are examined in Note 7). Environmental and social sustainability risks - Impact on the environment and community from Company activities The Board and management are committed to developing and building a sustainable business, ensuring the Company is an active and responsible member of the communities in which we operate. Corporate environmental policies and procedures are in place and communicated to and adhered to by all employees. External impact-assessment surveys and audits are conducted using third-party consultants who are specialists in their field. - Native title risk in relation to claims over the permits held by the Company Norwest works closely with the respective parties associated with any claim to come to a mutually beneficial agreement. 19 Recommendation 8.1 – Remuneration Committee The Board does not have a separate Remuneration Committee, rather the non-executive directors fulfil the function of a remuneration committee and therefore no remuneration committee has been formed in accordance with the compositional recommendation. Given the size and composition of the Board, it is not practicable that a separate remuneration committee be formed. To assist it in carrying out its function in relation to remuneration matters, the Company has adopted a Remuneration Committee Charter to assist it to fulfil its role as the Remuneration Committee, which states the function of the committee is to assist the Board in fulfilling its corporate governance responsibilities with respect to remuneration by reviewing and making appropriate recommendations on: - - Remuneration packages of directors and senior executives; and Employee incentive and equity-based plans. Recommendation 8.2 – Remuneration policies and practices The Company’s remuneration policy has been developed by taking into account the size of the management team, the nature and stage of development of the current operations and market conditions and comparable salary levels for companies of a similar size and operating in a similar sector. For details of the Company’s policies and practices regarding the remuneration of directors and senior executives refer to the Remuneration Committee Charter on the Company’s website as well as the Remuneration Report included within the Directors’ Report which includes the remuneration paid to Key Management Personnel and other relevant information. Recommendation 8.3 – Transactions to limit exposure to economic risk from participating in equity-based remuneration schemes The Company prohibits executives entering into arrangements to limit their exposure to Incentive Options granted as part of their remuneration package. 20 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF NORWEST ENERGY NL Report on the Audit of the Financial Report Opinion We have audited the financial report of Norwest Energy NL (“the Company”) and its controlled entity (“the Group”) which comprises the statement of financial position as at 30 June 2021, the statement of profit or loss and other comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended on that date and notes to the financial statements, including a summary of significant accounting policies and the directors’ declaration of the Company. In our opinion the financial report of the Group is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its financial performance for the year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under these standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of this report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the “Code”) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF NORWEST ENERGY NL (continued) Key Audit Matter – Cash and Cash Equivalents How our Audit Addressed the Key Audit Matter The Group’s cash and cash equivalents make up 68% of total assets by value and are considered to be the key driver of the Group’s operations. Our procedures over the existence of the Group’s cash and cash equivalents included but were not limited to: We do not consider cash and cash equivalents to be at a high risk of significant misstatement or to be subject to a significant level of judgement. However due to their materiality in the context of the financial statements as a whole, they are considered to be the area which had an effect on our overall strategy and allocation of resources in planning and completing our audit. Key Audit Matter – Exploration and evaluation expenditure • • • Documenting and assessing the processes and controls in place to record cash transactions; Testing a sample of cash payments to determine they were bona fide payments, were properly authorised and recorded in the general ledger; and Agreeing balances to independent confirmations. We have also assessed the appropriateness of the disclosures included in the financial report. How our Audit Addressed the Key Audit Matter The Group has capitalised a significant amount of exploration and evaluation expenditure during the year. Our procedures in assessing exploration and evaluation expenditure included but were not limited to the following: We do not consider exploration and evaluation expenditure to be at a high risk of significant misstatement, or to be subject to a significant level of judgement. • We assessed exploration and evaluation expenditure with reference to AASB 6 Exploration for and Evaluation of Mineral Resources. However due to the materiality in the context of the financial statements as a whole, this is considered to be an area which had an effect on our overall strategy and allocation of resources in planning and completing our audit. • We tested a sample of exploration and evaluation supporting expenditure documentation to ensure they were bona fide payments; and to • We documented and assessed the processes and controls in place to record exploration and evaluation transactions. We have also assessed the appropriateness of the disclosures included in the financial report. INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF NORWEST ENERGY NL (continued) Other Information The directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2021, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If based on the work we have performed we conclude there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Directors’ Responsibility for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with the Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or cease operations, or have no realistic alternative but to do so. Auditor’s Responsibility for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: www.auasb.gov.au/Home.aspx. We communicate with the directors regarding, amongst other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF NORWEST ENERGY NL (continued) We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and where applicable, related safeguards. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe those matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communications. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the remuneration report included in the directors’ report for the year ended 30 June 2021. In our opinion the remuneration report of Norwest Energy NL for the year ended 30 June 2021 complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Rothsay Auditing Dated 23 September 2021 Donovan Odendaal Partner Directors’ Declaration The Directors of the Company declare that, in the opinion of the Directors: (a) The attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the financial position and performance of the consolidated entity; and (ii) complying with Australian Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements. The financial statements and notes thereto also comply with International Financial Reporting Standards, as disclosed in Note 1 and other mandatory professional reporting requirements. The Directors have been given the declarations required by s.295A of the Corporations Act 2001. There are reasonable grounds to believe that Norwest Energy NL will be able to pay its debts as and when they become due and payable. (b) (c) (d) Signed in accordance with a resolution of the Directors made pursuant to s.295(5) of the Corporations Act 2001. Dated in Perth on this 23rd Day of September 2021. Signed Ernest Anthony Myers Non-Executive Director and Chairman 25 Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 June 2021 Note Consolidated Entity 2021 $ 2020 $ Continuing Operations Interest income Oil Sales Other Income Depreciation Audit fees Legal expense Exploration expense and Exploration write off Operating costs to P & L Provision for Restoration Employee, consulting, and administration expenses 2 2 2 21 10 10 14 691 - 577,784 1,237 2,537 1,174,388 578,475 1,178,162 (81,329) (41,000) (999) (26,369) - (77,248) (49,500) (18,810) (6,895,952) (255,265) (275,000) (1,452,588) 263,820 (1,137,853) (Loss) from continuing operations before income tax (445,255) (7,846,201) Income tax benefit 4 - - (Loss) from continuing operations for the year (445,255) (7,846,201) Other Comprehensive Income Exchange differences on translation of foreign operations Net change in fair value of available for sale financial assets transferred to profit and loss - - - - Total Comprehensive (Loss) attributable to Members of Norwest Energy NL (445,255) (7,846,201) Profit/(Loss) per share attributable to the ordinary equity holders of the company: Basic and diluted earnings/(loss) per share (Cents) 5 (0.01) (0.19) The above Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. 26 Statement of Financial Position as at 30 June 2021 Current Assets Cash and cash equivalents Trade and other receivables Other financial assets Total Current Assets Non-Current Assets Property, plant, and equipment Exploration and evaluation expenditure Other Assets Total Non-Current Assets Total Assets Current Liabilities Trade and other payables Provision for Annual Leave Provision for Long Service Leave Other Liabilities Total Current Liabilities Non-Current Liabilities Provision for Long Service Leave Provision for Restoration Other Liabilities Total Non-Current Liabilities Total Liabilities Net Assets Equity Contributed equity Reserves Accumulated losses Total Equity Note Consolidated Entity 2021 $ 2020 $ 6 8 9 10 11 12 13 14 13 3,524,952 204,161 - 3,729,113 3,054,835 30,697 - 3,085,532 2,008 1,394,382 81,188 1,477,578 6,422 408,677 158,103 573,202 5,206,691 3,658,734 499,863 7,134 13,287 91,440 611,724 - 11,180 - 11,180 77,523 5,037 - 78,219 160,779 11,259 275,000 84,523 370,782 622,904 531,561 4,583,785 3,127,173 15(a) 16 16 65,822,236 320,000 (61,558,451) 4,583,785 63,920,369 320,000 (61,113,196) 3,127,173 The above Statement of Financial Position should be read in conjunction with the accompanying notes. 27 Statement of Changes in Equity for the year ended 30 June 2021 Consolidated Entity Balance at 1 July 2020 Comprehensive income for the year Contributed Equity $ Share-Based Payment Reserve $ Accumulated Losses $ Total Equity $ 63,920,369 320,000 (61,113,196) 3,127,173 Profit/(Loss) for the year - - (445,255) (479,075) Total Comprehensive Income for the Year 63,920,369 320,000 (61,558,451) 2,648,098 Transactions with owners in their capacity as owners: Share issue (net of costs) 1,901,867 - - 1,901,867 Balance at 30 June 2021 65,822,236 320,000 (61,558,451) 4,549,65 Balance at 1 July 2019 Comprehensive income for the year 59,645,137 10,400 (53,266,995) 6,388,542 Profit/(Loss) for the year - (7,846,201) (7,846,201) Total Comprehensive Income for the Year 59,645,137 10,400 61,113,196 (1,457,659) Transactions with owners in their capacity as owners: Share issue (net of costs) 4,275,232 - Share options expired/exercised (1) Share based payments expense - - (10,400) 320,000 - - 4,275,232 (10,400) 320,000 Balance at 30 June 2020 63,920,369 320,000 (61,113,196) 3,127,173 (1) During the year options valued at $10,400 expired. The above Statement of Changes in Equity should be read in conjunction with the accompanying notes. 28 Statement of Cash Flows for the year ended 30 June 2021 Cash Flows from Operating Activities Payments to suppliers and employees Oil Sales Joint Venture Operator Management fees R&D Incentive Grant Recoveries and Government Grants Interest received Net Cash Used In Operating Activities Cash Flows from Investing Activities Payments for property, plant, and equipment Proceeds from sale of Production Assets Payments for exploration and evaluation expenditure Net Cash Used In Investing Activities Cash Flows from Financing Activities Proceeds from share issue Share issue costs Proceeds from Convertible Note Repayment of convertible Note Net Cash Provided by Financing Activities Net Increase/ (Decrease) in Cash Held Note Consolidated Entity 2021 $ 2020 $ (1,208,227) - 81,702 174,278 237,789 691 6(b) (713,767) (1,394,774) 2,537 119,354 192,504 162,587 1,238 (916,554) 100 - (704,885) (704,775) 227 700,000 (807,320) (107,093) 2,033,858 (145,190) - - 1,888,668 4,383,310 (358,078) 250,000 (750,000) 3,525,232 470,117 2,501,585 Cash and Cash Equivalent at the Beginning of the Financial Year Effects of exchange rate changes on cash held Cash and Cash Equivalents at 30 June 3,054,835 - 3,524,952 553,250 - 3,054,835 6(a) The above Statement of Cash Flows should be read in conjunction with the accompanying notes. 29 Notes to the Financial Statements ABOUT THIS FINANCIAL REPORT 1 Reporting Entity This financial report of Norwest Energy NL (‘the Company’) for the year ended 30 June 2021 comprises the Company and its subsidiary (collectively referred to as ‘the consolidated entity’ or ‘Group’). Norwest Energy NL is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange. The notes to the financial statements are organised into the following sections: (a) Key Performance: Provides a breakdown of the key individual line items in the statement of comprehensive income that is most relevant to understanding performance and shareholder returns for the year: Notes 2 3 4 5 Revenue from continuing operations Segment information Income tax expense Profit/(Loss) per share (b) Financial Risk Management: Provides information about the Consolidated Entity’s exposure and management of various financial risks and explains how these affect the Consolidated Entity’s financial position and performance: Notes 6 7 Cash and cash equivalents Financial risk management (c) Other Assets and Liabilities: Provides information on other balance sheet assets and liabilities that do not materially affect performance or give rise to material financial risk: Notes Trade and other receivables 8 9 Property, plant, and equipment 10 Exploration and evaluation expenditure 11 Other assets 12 Trade & other payables 13 Other liabilities 14 Provision for restoration (d) Capital Structure: This section outlines how the Consolidated Entity manages its capital structure and related financing costs (where applicable), as well as capital adequacy and reserves. It also provides details on the dividends paid by the Company: Notes 15 Contributed equity 16 Reserves and accumulated Losses 17 Share-based payments (e) Consolidated Entity Structure: Provides details and disclosures relating to the parent entity of the Consolidated Entity, controlled entities, investments in associates and any acquisitions and/or disposals of businesses in the year. Disclosure on related parties is also provided in the section: Notes 18 Parent entity information 19 20 Key management personnel disclosures & related party transactions Investment in controlled entities (f) Other: Provides information on items which require disclosure to comply with Australian Accounting Standards and other regulatory pronouncements, however, are not considered significant in understanding the financial performance or position of the Consolidated Entity: Notes 21 Remuneration of auditors 22 Commitments for expenditure 23 Contingencies 24 Events occurring after reporting date 30 Basis of Preparation 1a These general-purpose financial statements have been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Australian Accounting Interpretations, and the Corporations Act 2001. Norwest Energy NL is a for-profit entity for the purposes of preparing the financial statements. Compliance with IFRSs The financial statements of Norwest Energy NL also comply with International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board (IASB). New Accounting standards and interpretations Standards and Interpretations applicable to 30 June 2021 In the year ended 30 June 2021, the Directors have reviewed all of the new and revised Standards and Interpretations issued by the AASB that are relevant to the Company and effective for the current annual reporting period. As a result of this review, the Directors have determined that there is no material impact of the new and revised Standards and Interpretations on the Company and, therefore, no material change is necessary to Group accounting policies. Standards and Interpretations in issue not yet adopted The Directors have also reviewed all Standards and Interpretations in issue not yet adopted for the year ended 30 June 2021. As a result of this review the Directors have determined that there is no material impact of the Standards and Interpretations in issue not yet adopted on the Company and, therefore, no change is necessary to Group accounting policies. Principles of Consolidation 1b The consolidated financial statements incorporate the assets and liabilities of the Company as at 30 June 2021 and the results of its subsidiaries for the year then ended. The Company and its subsidiaries are referred to in this financial report as Reward or the Consolidated Entity. All inter-company balances and transactions between entities in the Consolidated Entity, including any unrealised profits or losses, have been eliminated on consolidation. GST 1c Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated as inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the Statement of Financial Position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flow. REVENUE FROM CONTINUING OPERATIONS 2 Interest income Oil sales JV Operator fees and other recoveries Proceeds of Sale of Exploration Asset Proceeds of Sale of Production Asset Research and development tax rebate received 2021 $ 2020 $ 691 - 303,506 100,000 1,237 2,537 281,884 - - 700,000 174,278 578,475 192,504 1,178,162 31 3 SEGMENT INFORMATION The Group has adopted AASB 8 Operating Segments which requires operating segments to be identified on the basis of internal reports of the Group that are reviewed by the chief operating decision-maker in order to allocate resources to the segment and to assess its performance. The Board of Norwest reviews internal reports prepared as Consolidated financial statements and strategic decisions of the Group are determined upon analysis of these internal reports. During the period the Group operated in one business segment, being the oil and gas sector. Accordingly, under the management approach outlined only one operating sector has been identified and no further disclosures are required in the notes to the Consolidated financial statements. 4 INCOME TAX EXPENSE (a) The major components of income tax expense are Income statement Current income tax: Current income tax benefit Deferred income tax: Relating to origination and reversal of temporary differences Unused tax losses not recognised as a DTA Income tax (expense)/income reported in the income statement 2021 $ 2020 $ 512,972 419,180 (344,641) (168,331) 1,636,286 (2,055,466) - - The aggregate amount of income tax attributable to the financial period differs from the amount calculated on the operating loss. The differences are recorded as follows: Accounting loss Prima facie tax payable at 26% (2020:27.5%) Non-deductible expenses Add tax effect of items not brought to account: Non-deductible and non-assessable permanent items Tax losses not brought to account 2021 $ (445,255) (115,766) 324 2020 $ (7,846,201) (2,157,705) (52,889) 168,331 - 102,239 2,055,466 - 32 (b) Deferred income tax Deferred income tax at 30 June relates to the following: Deferred tax liabilities Tax effect of exploration expenses Tax effect of other Set-off against carry forward losses Deferred tax liability balance Deferred tax assets Tax value of carry forward losses Set off against deferred tax liability Deferred tax assets – temporary differences Non-recognition of deferred tax asset Deferred tax asset balance (c) Tax losses Deferred tax assets Tax losses – revenue Tax losses – capital 2021 $ 2020 $ 362,539 23,991 (386,530) - 112,386 43,478 (155,864) - 11,847,579 (386,529) 125,568 (11,586,617) - 12,080,191 (155,864) 154,034 (12,078,361) - 10,006,026 1,841,553 11,847,579 10,132,394 1,947,797 12,080,191 At 30 June 2021, the Consolidated entity has $45,567,612 (2020: $43,927,968) of tax losses that are available indefinitely for offset against future taxable profits of the Company. A net deferred tax asset balance has not been recognised on the Statement of Financial Position in respect of the amount of these losses. The recognition and utilisation of losses is subject to the loss recoupment rules being satisfied. The potential deferred tax asset will only be obtained if: - assessable income is derived of a nature and of amount sufficient to enable the benefit from the deductions to be realised or the benefit can be utilised by the Company and/or the Consolidated entity providing that; - the conditions for deductibility imposed by the law are complied with; and - no changes in tax legislation adversely affect the realisation of the benefit from the deductions. (d) Tax consolidation legislation The Company had not elected to consolidate for tax purposes at balance date. PROFIT/(LOSS) PER SHARE 5 Basic loss per share The profit/(loss) for the year and the weighted average number of ordinary shares used in the calculation of basic loss per share are as follows: Loss for the year after income tax 2021 Cents Per Share (0.01) 2020 Cents Per Share (0.19) 2021 $ 2020 $ (445,255) (7,846,201) 2021 No. 2020 No. Weighted average number of ordinary shares for the purposes of basic earnings per share 4,834,127,428 4,097,914,388 33 6 CASH AND CASH EQUIVALENTS Reconciliation of Cash 6a For the purposes of the Statements of Cash Flows, cash includes cash on hand and in banks. Cash at the end of the financial year as shown in the Statement of Cash Flows is reconciled to the related items in the Statement of Financial Position as follows: Cash and short-term deposits 3,524,952 3,054,835 2021 $ 2020 $ 6b Reconciliation of Net Cash used In Operating Activities to Operating Profit/(Loss) after Income Tax Profit/(Loss) for the year Depreciation Exploration costs expensed included in investing activities Equity settled share-based payment Rental adjustment for right of use asset Interest Lease Liability Office Accrued expenditure Profit/(Loss) on Sale of Investment Production Expenditure Change in assets and liabilities during the financial year: Trade and other receivables Investments and assets Provisions Borrowings Trade and other payables (445,255) 81,329 26,369 - (84,549) 13,248 (294,089) - - (173,463) - (259,697) - 422,340 (7,846,201) 77,248 6,895,952 309,600 (71,253) (700,000) 255,265 48,792 58 276,677 - (162,692) Net cash inflow/(outflow) from operating activities (713,767) (916,554) 7 FINANCIAL RISK MANAGEMENT The consolidated entity's activities expose it to a variety of financial risks: market risk, credit risk, liquidity risk and cash flow interest rate risk. The consolidated entity's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the consolidated entity. The totals for each category of financial instruments, measured in accordance with AASB 139 as detailed in the accounting policies to these financial statements, are as follows: Financial Assets Cash and cash equivalents Loans and receivables Total Financial Assets Financial Liabilities Financial liabilities at amortised cost Trade and other payables Note 2021 $ 2020 $ 6a 8 3,524,952 204,161 3,054,835 30,697 3,729,311 3,085,532 12 499,863 77,523 Total Financial Liabilities 499,863 77,523 Risk management is carried out by the Board of Directors, who identify, evaluate and manage financial risks as they consider appropriate. 34 7a Market Risk (i) Cash Flow Interest Rate Risk Refer to (d) below. Credit Risk 7b The Group does not have any significant concentrations of credit risk. Credit risk is managed by the Board and arises from cash and cash equivalents as well as credit exposure including outstanding receivables and committed transactions. All cash balances held at banks are held at internationally recognised institutions. The majority of receivables are immaterial to the Group. Given this, the credit quality of financial assets that are neither past due nor impaired can be assessed by reference to historical information about default rates. The maximum exposure to credit risk at reporting date is the carrying amount of the financial assets as summarised at the start of this note. The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if available) or to historical information about counterparty default rates. Financial assets that are neither past due nor impaired are as follows: Cash and cash equivalents ‘AA’ S&P rating 2021 $ 2020 $ 3,524,952 3,054,835 Liquidity Risk 7c Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and, the availability of funding through the ability to raise further equity or through related party entities. Due to the dynamic nature of the underlying businesses, the Board aims at maintaining flexibility in funding through management of its cash resources. The Group has no financial liabilities at the year-end other than normal trade and other payables incurred in the general course of business. All financial liabilities mature in less than 6 months. Cash Flow Risk 7d As the Group has significant interest-bearing assets in the form of cash, the Group's income and operating cash flows are exposed to changes in market interest rates. Based on the year-end balances, a 1% increase in interest rates would have decreased the consolidated loss by $35,250 (2020: $30,548) and increased the cash balances by a corresponding amount. There were no other amounts included in Net Assets subject to material interest rate risks. TRADE AND OTHER RECEIVABLES 8 GST receivable Trade and other receivables 2021 $ 2020 $ 6,471 197,690 7,287 23,410 204,161 30,697 No receivables are impaired or past due but not impaired. Refer to Note 7 for Financial Risk considerations. The carrying value of all receivables approximates their fair value. 35 9 PLANT AND EQUIPMENT Office Furniture and Equipment at cost Accumulated depreciation 2021 $ 2020 $ 262,374 (260,366) 262,374 (255,952) 2,008 6,422 Movements in carrying amounts Movement in the carrying amounts for each class of plant and equipment between the beginning and the end of the current financial year. 2021 Balance at the beginning of the year Additions Disposals Depreciation Balance at end of the Year 2020 Balance at the beginning of the year Additions Disposals Depreciation Balance at end of the Year 10 EXPLORATION AND EVALUTION EXPENDITURE Exploration and evaluation phase: Carrying amount at the beginning of the year Additions Exploration expenditure impairment Carrying amount at the end of the year Production phase: Carrying amount at the beginning of the year Additions Operating costs to P & L Balance at 30 June 2021 Office Furniture and Equipment $ 6,422 - - (4,414) 2,008 Total $ 6,422 - - (4,414) 2,008 8,065 - (284) (1,359) 6,422 8,065 - (284) (1,359) 6,422 2021 $ 2020 $ 1,394,382 408,677 408,677 1,012,074 (26,369) 6,540,305 764,324 (6,895,952) 1,394,382 408,677 - - - - 212,268 42,997 (255,265) - The recoverability of the carrying amounts of exploration and evaluation assets is dependent on the successful development and commercial exploitation or sale of the respective area of interest. This is assessed at balance date on an annual basis. 36 11 OTHER ASSETS Right to Use Asset Accumulated Depreciation The right to use asset relates to the capitalisation of the Office lease under AASB 16 12 TRADE AND OTHER PAYABLES Trade Payables Accrued Expenses Other payable 13 OTHER LIABILITIES Lease Liability (Office Lease) - Current Lease Liability (Office Lease) – Non-Current 2021 $ 2020 $ 233,992 (152,804) 233,992 (75,889) 81,188 158,103 2021 $ 2020 $ 103,596 389,089 7,178 32,753 38,000 6,770 499,863 77,523 2021 $ 2020 $ 91,440 78,218 - 84,523 The lease liability relates to the capitalisation of the Office lease under AASB 16 (See note 11) 14 PROVISION FOR RESTORATION Balance at 1 July 2020 Provision made during the year Balance at 30 June 2021 15 CONTRIBUTED EQUITY 15a Issued capital 2021 $ 2020 $ 275,000 (263,820) - 275,000 11,180 275,000 2021 $ 2020 $ 5,073,443,410 fully paid ordinary shares (30 June 2020: 4,734,467,074) 65,822,237 63,920,369 37 15b Movements in Ordinary Shares during the past two years Date Details 01-Jul-19 Opening balance 20-Nov-19 Share Placement 18-Dec-19 15-Jan-20 03-Feb-20 Share Placement Share Placement Share Placement 10-Mar-20 Convertible Note Repayment Share Issue 29-Jan-21 Share Placement Share Issue Costs No. of Ordinary Shares 3,382,092,727 661,670,831 227,171,370 359,685,976 3,846,170 100,000,000 338,976,336 5,073,443,410 Issue price $ $ 0.0035 0.0035 0.0035 0.0035 0.0025 0.0060 59,645,137 2,315,848 795,100 1,258,901 13,462 250,000 2,033,858 (490,069) 65,822,237 15c Terms of Conditions of Ordinary Shares Ordinary shares have the right to receive dividends as declared and, in the event of winding up the company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company. 15d Unissued Capital - Options There are no unissued Options as at 30 June 2021. 15e Capital Risk Management The Group defines its Capital as total equity of the Group, being $4,583,785 for the year ended 30 June 2021 (2020: $3,127,173). The Group manages its capital to ensure that it can continue as a going concern while financing the development of it projects through primarily equity-based financing. The Board’s policy is to maintain a strong capital base to maintain investor, creditor and market confidence and to sustain future development of the business. Given the stage of development of the Group, the Board’s objective is to minimise debt and to raise funds as required through the issue of new shares. There were no changes in the Consolidated entity’s approach to capital management during the year. During the next 12 months, the Group will continue to explore farm-out opportunities and additional issues of equity. 16 RESERVES AND ACCUMULATED LOSSES Accumulated Losses 16a Accumulated losses at the beginning of the year Net loss for the year Other comprehensive income Transfer of reserves due to cancelled incentive options Accumulated Losses at the end of the year 16b Reserves Share based payments reserve (i) (i) Share-Based Payments Reserve The share-based payments reserve is used to recognise the fair value of incentive options issued by the Group. Balance at beginning of the year Expired during the year Exercised during the period Balance at the End of the Year 2021 $ 2020 $ (61,113,196) (445,255) - - (53,266,995) (7,846,201) - - (61,558,451) (60,113,196) 320,000 320,000 320,000 320,000 320,000 - - 320,000 10,400 (10,400) 320,000 320,000 38 17 SHARE-BASED PAYMENTS (a) Recognised Share-based Payments Expense The Group provides Incentive Options to officers, employees, and consultants as part of remuneration and incentive arrangements from time to time. The number of options granted, and the terms of the options are determined by the Board. Shareholder approval is sought where required. During the past two years, the following equity settled share-based payments have been recognised: (b) Summary of Incentive options granted as Share-based payments The following table illustrates the number and weighted average exercise prices (“WAEP”) of Incentive Options granted as share-based payments at the beginning and end of the financial year. Number 2021 Outstanding at the beginning of year Expired/lapsed during the year Exercised during the year Granted during the year Outstanding and exercisable at end of year 156,000,000 - - 156,000,000 WAEP 2021 0.0092 Number 2020 5,200,000 (5,200,000) 156,000,000 156,000,000 WAEP 2020 0.006 0.0092 (c) Valuation models and key assumptions used The fair value of the equity-settled share options granted is estimated as at the date of grant using a Binomial option valuation model taking into account the terms and conditions upon which the options were granted. The table below lists the inputs to the valuation model used for the share options granted by the Group that are currently on issue and outstanding at the end of year: Number of options Fair value at grant date Share price at grant date Exercise price Expected volatility¹ Expected life² Dividend yield (%) ³ Risk-free interest rate Jan 2020 156,000,000 $0.002 $0.003 Various – see below 150% 4 years Nil 1.75% ¹: The expected volatility is indicative of future trends, which may not necessarily be the actual outcome. ²: The dividend yield reflects the assumption that the current dividend pay-out will remain unchanged. ³: The expected life of the options is based on the expiry date of the options as there is limited track record of early exercise of options. (d) Weighted Average Remaining Contractual Life As 30 June 2021, the weighted average remaining contractual life of Incentive Options on issue that had been granted as share-based payments was 3.67 years (2020: 4 years). (e) Range of Exercise Prices At 30 June 2021, the range of exercise prices of Incentive Options granted as share-based payments is $0.0089 - $0.0107. (f) Weighted average Fair Value The weighted average fair value of Incentive Options granted as share-based payments by the Group is $0.0092 (2020: $0.0092). 39 18 PARENT ENTITY INFORMATION 18a Summary Financial Information Financial Position Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Equity Issued capital Reserves Accumulated losses Total equity Financial Performance Profit/(Loss) for the year Other comprehensive income Parent 2021 $ 2020 $ 3,604,755 1,874,829 2,800,479 1,726,158 5,479,584 4,526,637 244,752 - 158,053 325,782 244,752 483,835 65,822,239 320,000 (60,907,407) 63,920,372 320,000 (60,197,569) 5,234,832 4,042,803 (709,838) (6,368,796) Total comprehensive profit/ (loss) for the year (709,838) (6,368,796) 18b Guarantees Norwest Energy NL has not entered into any guarantees in relation to the debts of its subsidiary. 18c Other Commitments and Contingencies Norwest Energy NL has no commitments to acquire property, plant, and equipment. Refer to Note 24 for the Company’s contingent liabilities. 19 INVESTMENT IN CONTROLLED ENTITIES Name of Entity Country of Incorporation Class of Shares Westranch Holdings Pty Ltd Australia Ordinary Equity Holding 2021 % 100 2020 % 100 40 20 KEY MANAGEMENT PERSONNEL DISCLOSURES & RELATED PARTY TRANSACTIONS 20a Details of Remuneration of Key Management Personnel Short-term salary and fees Post-employment benefits Share-based payments Detailed remuneration disclosures are provided in the remuneration report. REMUNERATION OF AUDITORS 21 Australia – Rothsay Auditing 2021 $ 2020 $ 491,702 3,123 90,000 609,825 522,488 1,688 90,000 614,176 41,000 41,000 49,500 49,500 No non-audit services have been provided to the Group by the auditor. The Audit fees for 2021 are $32,000. $49,500 includes the previous year’s fees that were not accrued at 30 June 2020s. 22 22a COMMITMENTS FOR EXPENDITURE Exploration expenditure commitments Within one year One year or later and no later than five years Later than five years 3,570,000 4,277,640 - 2,694,440 - - 7,847,640 2,694,440 In order to maintain current rights of tenure to exploration permits, the Consolidated entity is required to perform minimum exploration work to meet the minimum expenditure requirements specified by various Governments. These obligations are subject to renegotiation. Notwithstanding the minimum requirements management has estimated the commitments for expenditure based on reasonable expectation of activities on the exploration permits. These obligations are not provided for in the financial report. The permit commitments above will be met through either capital raisings, free carry from farm-in partners, or asset sales. In order to ensure that the Group’s permits remain in good standing, discussions and negotiations with the relevant regulatory bodies take place as required to manage the timing of permit commitments where possible. Should the Group not be permitted to amend the timing of the permit commitments, or have sufficient funds to satisfy those commitments, the Group risks having to relinquish title to those permits and return the permit(s) to the relevant regulatory body. 22b Other commitments Management have identified the operating lease for the registered office and insurance as commitments (other than the exploration commitments disclosed above): Within one year One year or later and no later than five years Later than five years 131,327 - - 126,396 379,188 - 131,327 505,584 41 23 CONTINGENCIES 23a Contingent Assets There are no contingent assets at reporting date. 23b Contingent Liabilities There are no contingent liabilities at reporting date. 24 EVENTS OCCURRING AFTER REPORTING DATE On 30th August 2021 the Company completed a capital raising of $2.75 million (before costs) through a placement of shares to a range of sophisticated and professional investors. On 8th September 2021 the Company announced that preliminary drilling results of Lockyer Deep-1 indicated a significant conventional gas discovery with gas encountered in excellent quality Kingia Sandstones. The apparent absence of gas water contact in the Kingia supports the case for a large resource across the greater Lockyer Deep/North Erregulla Deep structure. No matters or circumstances have arisen other than the above, since the end of the financial year which significantly affected or may significantly affect the operations of the Consolidated Entity, the results of the Consolidated Entity, or the state of affairs of the Consolidated Entity as reported to the year ended 30 June 2021. 25 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 25a Historical Cost Convention These financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets. Critical Accounting Estimates The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 27. Income Tax 25b The consolidated entity adopts the liability method of tax-effect accounting whereby the income tax expense is based on the profit adjusted for any non-assessable or disallowed items. Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss. Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised, or liability is settled. Deferred tax is credited in the Statement of Profit or Loss and Other Comprehensive Income except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity. Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against which deductible temporary differences can be utilised. The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the consolidated entity will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law. Leases 25c At the lease commencement, the Company recognises a right-of-use asset and associated lease liability for the lease term. The lease term includes extension periods where the Company believes it is reasonably certain that the option will be exercised. 42 The right-of-use asset is measured using the cost model where cost on initial recognition comprises of the lease liability, initial direct costs, prepaid lease payments, estimated cost of removal and restoration less any lease incentives received. The right-of-use asset is depreciated over the lease term on a straight-line basis and assessed for impairment in accordance with the impairment of assets accounting policy. The lease liability is initially measured at the present value of the remaining lease payments at the commencement of the lease. The discount rate is the rate implicit in the lease, however where this cannot be readily determined then the Company’s incremental borrowing rate is used. Subsequent to initial recognition, the lease liability is measured at amortised cost using the effective interest rate method. The lease liability is remeasured whether there is a lease modification, change in estimate of the lease term or index upon which the lease payments are based (e.g. CPI) or a change in the Company's assessment of lease term. Where the lease liability is remeasured, the right-of-use asset is adjusted to reflect the remeasurement or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero. Exceptions to lease accounting The Company has elected to apply the exceptions to lease accounting for both short-term leases (i.e. leases with a term of less than or equal to 12 months) and leases of low-value assets. The Company recognises the payments associated with these leases as an expense on a straight-line basis over the lease term. 25d Adoption of new and revised accounting standards The Company has adopted all standards which became effective for the first time at 31 December 2019. The Company has adopted AASB 16 Leases using the modified retrospective approach from 1 July 2019 but has not restated comparatives for the 2019 reporting period, as permitted under the specific transition provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules are therefore recognised in the opening balance sheet on 1 July 2019. The new accounting policies are disclosed in note 25c. On adoption of AASB 16, the Company recognised lease liabilities in relation to leases which had previously been classified as ‘operating leases’ under the principles of AASB 117 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate as of 1 July 2020. The weighted average incremental borrowing rate applied to the lease liabilities on 1 July 2020 was 2.6%. 25e Revenue Recognition Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances and amounts collected on behalf of third parties. Revenue is recognised for major business activities as follows: (i) (ii) Interest Income Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets. Other Services Other debtors are recognised at the amount receivable and are due for settlement within 30 days from the end of the month in which services were provided. Exploration and Evaluation Expenditure 25f Exploration and evaluation expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area or where activities in the area have not yet reached a stage which permits reasonable assessment of the economically recoverable reserves. 43 Accumulated costs in relation to an abandoned area are written off in full against operating results in the year in which the decision to abandon the area is made. When production commences the accumulated costs for the relevant area of interest are classified as development costs and amortised over the life of the project area according to the rate of depletion of the economically recoverable reserves. Where independent valuations of areas of interest have been obtained, these are brought to account. Subsequent expenditure on re-valued areas of interest is accounted for in accordance with the above principles. A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest. At 30 June 2021 the Directors considered that the carrying value of the oil and gas tenement interests of the consolidated entity was as shown in the Statement of Financial Position and no further impairments arises other than that already recognised. Plant and Equipment 25g Each class of plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation and impairment losses. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the consolidated entity and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the Statement of Comprehensive Income during the financial period in which they are incurred. The carrying amount of plant and equipment is reviewed annually by the Directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the assets’ employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts. Depreciation The depreciable amount of all plant and equipment is depreciated on a diminishing value over their useful lives to the consolidated entity commencing from the time the asset is held ready for use. The depreciation rates used for each class of depreciable assets are: Class of Fixed Asset Plant and Equipment Depreciation Rate 27% Declining Balance The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the Statement of Comprehensive Income. When revalued assets are sold, amounts included in the revaluation reserve relating to that asset are transferred to retained earnings. Trade Receivables 25h Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less allowance for doubtful debts. Trade receivables are due for settlement no more than 30 days from the date of recognition. Collectability of trade receivables is reviewed on an ongoing basis. Debts that are known to be uncollectible are written off. An allowance for bad debts is established when there is objective evidence that the consolidated entity will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is recognised in the Statement of Comprehensive Income. They are recognised initially at fair value and subsequently at amortised cost. Deposits with maturity periods in excess of three months but less than twelve months are included in receivables and not discounted if the effect of discounting is immaterial. Trade and Other Payables 25i These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial year and which are unpaid, together with assets ordered before the end of the financial year. The amounts are unsecured and are usually paid within 30 days of recognition. 44 Employee Entitlements 25j (i) Wages, salaries and annual and sick leave A liability for wages, salaries and annual leave expected to be settled within 12 months of the reporting date is recognised in other payables and is measured as the amount unpaid at balance date at current pay rates in respect of employees’ services up to that date. No liability exists for sick leave. (ii) Long service leave A liability for long service leave is recognised in the provision for employee benefits and is measured as the present value of expected future payments to be made in respect of services provided by employees’ up to balance date. Equity-Based Payments 25k Equity-based compensation benefits are provided to Directors and executives. The fair value of options granted to Directors and executives is recognised as an employee benefit expense with a corresponding increase in contributed equity. The fair value is measured at grant date and recognised over the period during which the Directors and/or executives becomes unconditionally entitled to the options. Where options are issued to consultants the fair value of the options given is valued by the market value of the service being provided. The fair value at grant date is independently determined using an option pricing model that takes into account the exercise price, the term of the option, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the option, the share price at grant date and expected price volatility of the underlying share, the expected divided yield and the risk-free interest rate for the term of the option. 25l (i) (ii) Earnings per share Basic earnings per share Basic earnings per share is determined by dividing the profit attributable to equity holders of the company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year. Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after-income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. 25m Segment Reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker has been identified as the steering committee that makes strategic decisions. The standard requires a ‘management approach’, under which segment information is presented on the same basis as that used for internal reporting purposes. The segments are reported in a manner that is consistent with the internal reporting provided to the chief operating decision maker. An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All operating segments’ operating results are regularly reviewed by the Group’s Managing Director to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. Segment results that are reported to the Managing Director include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets (primarily the Company’s headquarters), head office expenses, and income tax assets and liabilities. Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment, and intangible assets other than goodwill. Impairment of Assets 25n Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). 45 Cash and Cash Equivalents 25o Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the Statement of Financial Position. 25p Provisions Provisions are recognised when the consolidated entity has a present legal or constructive obligation as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Contributed Equity 25q Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options, or for the acquisition of a business, are included in the cost of the acquisition as part of the purchase consideration. If the entity reacquires its own equity instruments, e.g., as the result of a share buy-back, those instruments are deducted from equity and the associated shares are cancelled. No gain or loss is recognised in the Statement of Comprehensive Income and the consideration paid including any directly attributable incremental costs (net of income taxes) is recognised directly in equity. Comparative Figure 25s When required by accounting standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. 25t Government Grants Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received, and the Group satisfies all attached conditions. When the grant relates to an expense item, it is recognised as income over the periods necessary to match the grant on a systematic basis to the costs that it is intended to compensate. When the grant relates to an asset, the fair value is credited to a deferred income account and is released to the Consolidated Statement of Profit or Loss and other Comprehensive Income over the expected useful life of the relevant asset by equal annual instalments. Where a grant is received in relation to the tax benefit of research and development costs, the grant shall be credited to other income in the Consolidated Statement of Profit or Loss and other Comprehensive Income in the year of receipt. 27 i) CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS Significant accounting judgements In the process of applying the Group’s accounting policies, management has made the following judgements, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements: Capitalisation of exploration and evaluation expenditure The Group has capitalised significant exploration and evaluation expenditure on the basis either that this is expected to be recouped through future successful development (or alternatively sale) of the Areas of Interest concerned or on the basis that it is not yet possible to assess whether it will be recouped. As at 30 June 2021, the carrying value of capitalised exploration expenditure is $1,394,382. ii) Significant accounting estimates and assumptions The carrying amounts of certain assets and liabilities are often based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are: 46 Impairment of capitalised exploration and evaluation expenditure The future recoverability of capitalised exploration and evaluation expenditure is dependent on a number of factors, including whether the Group decides to exploit the related lease itself or, if not, whether it successfully recovers the related exploration and evaluation asset through sale. Factors that could impact the future recoverability include the level of reserves and resources, future technological changes, costs of drilling and production, production rates, future legal changes (including changes to environmental restoration obligations) and changes to commodity prices. Valuation of share-based payments The Group measures the cost of equity settled share-based payments at fair value at the grant date using the Black- Scholes model taking into account the exercise price, the term of the option, the impact of dilution, the share price at grant date, the expected volatility of the underlying share, the expected dividend yield and risk-free interest rate for the term of the option. Where options are issued to consultants, the Group values the service provided based on market rates. In the absence of market rates, the share-based payments are valued as above. 47 Registered Office Level 2, 30 Richardson Street West Perth Western Australia 6005 Telephone: +61 8 9227 3240 Facsimile: +61 8 9227 3211 Email: info@norwestenergy.com.au www.norwestenergy.com.au 48 

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